Slower Growth in Healthcare Spending: Will Employers See Improved Medical Renewals as a Result?

PriceWaterhouseCoopers recently released the results of their 2013 PwC Health Research Institute report. The report finds that the expected increase in cost of medical services also known as “medical trend” is expected to be 7.5% which is consistent with 2012 figures. Medical trend is a primary metric in helping insurers and employers estimate future plan costs.

According to PwC, four factors lowering or “deflating” trend include:

Reduced costs of medical supplies and equipment cost being driven by market competition over the past two years;

More brand name drugs coming off patent which are resulting in lower cost generic alternatives.

Two factors responsible for an uptick in trend is an expected increase in healthcare services utilization. Most experts believe as the American economy turns around we will see increased healthcare utilization due to a pent up demand of care that has been put off during the recession. Additionally, medical advances are resulting in costlier treatments and doctors are now able to prolong life and treat diseases more effectively with new and improved techniques that come with a high price tag.

While each employer groups circumstances are unique, in general, the premium increases being passed on by insurers in 2012 seem to be more favorable than the past two years. The slower spending nationally for healthcare services has been reflected in the decreased utilization in services, which translates into lower claims costs. An additional wild card in the mix is the highly competitive landscape between the large commercial carriers. The majority of health insurers are working very hard to grow their market share heading into 2014. The result of this has been competitive pricing and competitive renewals in many cases.

It is important to understand how medical trend directly impacts your renewal and what trend your specific carrier is utilizing. More importantly, employers should continue to work as aggressively as possible to manage their costs through a combination of plan design, wellness, incentives and communication. That’s exactly what we help our clients do at Hill, Chesson & Woody – contact us today to help your business contain costs.

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